income tax

Tax

Filing Requirements for Dependents

Whether a dependent has to file a return generally depends on the amount of the dependent’s earned and unearned income and whether the dependent is married, is age 65 or older, or is blind.

Note: A dependent may have to file a return even if his or her income is less than the amount that would normally require a return.

Even if you are not legally required to file, you should file a federal tax return to get money back if any of the following apply:

      • You had income tax withheld from your pay.
      • You qualify for the earned income credit.
      • You qualify for the additional child tax credit.

Contact us for further information. We’ll advise you about your particular situation.

Tax

Six Facts about the Alternative Minimum Tax

The Alternative Minimum Tax attempts to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax. The AMT provides an alternative set of rules for calculating your income tax. In general, these rules should determine the minimum amount of tax that someone with your income should be required to pay. If your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax.

Here are six facts the Internal Revenue Service wants you to know about the AMT and changes for tax year 2010.

  1. Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the AMT in 1969, targeting higher income taxpayers who could claim so many deductions they owed little or no income tax.
  2. Because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT.
  3. You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount.
  4. The AMT exemption amounts are set by law for each filing status.
  5. For tax year 2010, Congress raised the AMT exemption amounts to the following levels: $72,450 for a married couple filing a joint return and qualifying widows and widowers; $47,450 for singles and heads of household; $36,225 for a married person filing separately.
  6. The minimum AMT exemption amount for a child whose unearned income is taxed at the parents’ tax rate has increased to $6,700 for 2010.

If you want further information on the AMT and your tax situation, please let us know.

Estate Tax

Gift Taxes

In 2011, if you give any one person gifts such as cash or property valued at more than $13,000, you must report the total gifts to the Internal Revenue Service. You may have to pay tax on the gifts, but the person who receives your gift does not have to report the gift to the IRS or pay gift or income tax on its value.

Gifts include both cash and property, including the use of property, without expecting to receive something of equal value in return. For example, if you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift.

There is a lifetime maximum of $5 million and there are some exceptions to the tax rules on gifts. The following gifts do not count against the annual limit of $13,000 in 2011:

  • Tuition or medical expenses that you pay directly to an educational or medical institution for someone’s benefit
  • Gifts to your spouse
  • Gifts to a political organization
  • Gifts to qualifying charities (also deductible on your tax forms for the value of the gifts made)

If you are married, both you and your spouse can give separate gifts of up to the annual limit of $13,000 each or a total of $26,000 in 2011 to the same person without making it a taxable gift.

If you’re confused about gift taxes or need more information,we can help clear up the confusion. Contact our office today.

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